Risk aversion and support for merit pay: Theory and evidence from minnesota's q comp program

Carl Nadler, Matthew Wiswall

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

Recent research attributes the lack of merit pay in teaching to the resistance of teachers. This article examines whether the structure of merit pay affects the types of teachers who support it. We develop a model of the relative utility teachers receive from merit pay versus the current fixed schedule of raises. We show that if teachers are risk averse, teachers with higher base salaries would be more likely to support a merit pay program that allows them to keep their current base salary and risk only future salary increases. We test the predictions of the model using data from a new merit pay program, the Minnesota Q Comp program, which requires the approval of the teachers in each school district. Consistent with the model's predictions, we find that districts with higher base salaries and a higher proportion of teachers with master's degrees are more likely to approve merit pay.

Original languageEnglish (US)
Pages (from-to)75-104
Number of pages30
JournalEducation Finance and Policy
Volume6
Issue number1
DOIs
StatePublished - Dec 2011

ASJC Scopus subject areas

  • Education

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